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State Union Membership, 2012 Print
Written by John Schmitt, Janelle Jones, and Milla Sanes   
Friday, 25 January 2013 10:30

On January 23, the Bureau of Labor Statistics (BLS) released its estimates for union membership in the United States in 2012. This post focuses on the union membership numbers by state. In addition to presenting the BLS estimates for overall union membership in each state, we also provide our own breakdown of state union membership in the private and public sector.

Both the BLS and our own estimates are drawn from the Current Population Survey (CPS).* To give a picture of short-term trends, we present union membership data for both 2011 and 2012.

Table 1 shows total union membership in each of the 50 states and the District of Columbia in 2011 and 2012, based on the BLS data. The last row of the table shows the same information for the nation as a whole. The first three columns present data on the total number of union members. The last three columns display the data as a share of wage and salary workers (that is, excluding the self-employed).

In 2012, California (2.5 million union members), New York (1.8 million), and Illinois (0.8 million) had the most union members. New York (23.2 percent of employees), Alaska (22.4 percent), and Hawaii (21.6 percent) had the highest unionization rates. North Carolina (2.9 percent), Arkansas (3.2 percent), and South Carolina (3.3 percent) had the lowest unionization rates. (Tables 2 and 3 in the longer pdf version of this post show the same data separately for the private and public sectors within each state.)

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Public-Sector Union Numbers, 2012 Print
Written by John Schmitt   
Wednesday, 23 January 2013 13:15

The Bureau of Labor Statistics unionization estimates for 2012, released this morning, are generally bad news for labor. The overall unionization rate fell 0.5 percentage points. The rate was down 0.3 percentage points in the private sector and 1.1 percentage points in the public sector. (CEPR's advance estimates were very close to the official numbers.)

The big drop in unionization in the public sector is rightly getting a lot of attention. The number of public-sector union members fell by 234,000 last year. This is partly the product of a decline in employment in the sector, which has seen employment fall every year since 2009.

But, the share of public-sector workers in unions also fell, from 37.0 percent in 2011 to 35.9 percent in 2012. This sizeable drop may well reflect the organized attacks against public-sector workers in states such as Wisconsin, where public-sector union membership dropped by about 48,000 workers.

But, it is still too early to tell. As the chart below shows, the unionization rate for public-sector workers has fluctuated in a narrow band since the late 1970s and this year's decline leaves union density in the public sector within that long-term range.

union-membership-48-12

 
Are the Job Polarization Data Robust? Print
Written by Heidi Shierholz   
Friday, 18 January 2013 15:55

This post is the fourth in a short series that assesses the role of technological change and job polarization in wage inequality trends.

In an earlier post, John Schmitt showed that “job polarization”—the expansion of low- and high-wage occupations at the expense of occupations in the middle—did not occur in the 2000s, (and therefore could not be responsible for rising wage inequality in the 2000s). In this post, I examine how well the key figures at the heart of the “job polarization” analysis really fit the underlying data. I begin with a closer look at the data for the 1990s, the decade that appears to conform most closely to the patterns implied by the job polarization explanation for wage inequality.

In a recent piece critical of research myself, John, and Larry Mishel are doing on technology and wages, Dylan Matthews makes a lot of our interpretation of the following chart for the 1990s. The chart, which we prepared for a paper presented at a conference earlier this month, shows the change between 1989 and 2000 in the share of total employment in 100 different occupation groups arrayed by their average wage level (labeled “skill percentile”):

The two lines are statistically smoothed versions of the individual data points, which appear as blue diamonds. Both lines show a rough U-shape that is consistent with the standard story of job polarization: employment increases were largest at the top and bottom of the skill distribution and smallest in the broad middle. 

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Union Membership, 2012 Print
Written by John Schmitt and Janelle Jones   
Thursday, 17 January 2013 13:00

On January 23, the Bureau of Labor Statistics will release its estimates of “Union Membership” for 2012. Using the same data from the Current Population Survey (CPS), we have compiled advance estimates for union membership and coverage for 2012 and find a large drop in unionization last year. Most of the losses occurred in the public sector, where union membership fell 1.0 percentage points or about 231,000 members. But, membership also fell about 0.3 percentage points, or about 175,000 members in the private sector.

union-2013-table-1

By industry, the biggest gainers were: administrative and support services (up 51,000 members); arts, entertainment, and recreation (up 24,000); and machinery manufacturing (up 24,000). 

But, by far, the industries experiencing the largest losses were concentrated in the public sector, with educational services (down 199,000 members) and public administration (down 92,000 members). 

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Occupation Employment Trends and Wage Inequality: What the Long View Tells Us Print
Written by Lawrence Mishel   
Tuesday, 15 January 2013 13:05

This post is the third in a short series that assesses the role of technological change and job polarization in wage inequality trends.

The discussion of job polarization—the expansion of high and low-wage occupations while middle-wage occupations decline—and its role in driving wage inequality would benefit from a longer examination of occupational change and technology’s impact.

“Occupational upgrading” has been going on for 60 years or more. By occupational upgrading, we mean the erosion of employment in blue-collar and, more recently, pink-collar (administrative/clerical) occupations and the corresponding employment expansion of high wage, professional and managerial white-collar occupations. The share of employment in low-wage, service occupations (food preparation, janitorial/cleaning services, personal care and services) has actually been relatively stable for many decades and remained a small—roughly 15 percent—share of total employment.

The bottom line for the discussion of the role that technologically-driven occupation trends have played in generating wage inequality is that occupational upgrading has been occurring for decades, through periods of both rising and falling wage inequality and through both rising and falling median real wage growth. In our view, this makes occupational employment shifts a poor candidate for explaining the rise in wage inequality since 1979. 

In our forthcoming paper, John Schmitt, Heidi Shierholz and I document these employment trends using data over the 1959 to 2007 period drawn from a Daron Acemoglu and David Autor (2011) paper and supplemented by our analysis of Current Population Survey data from 1979 onwards. These data are based on occupation shares of total employment but the trends are the same if one examines shares of total hours worked.

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Timing Matters: Can Job Polarization Explain Wage Trends Print
Written by Lawrence Mishel   
Monday, 14 January 2013 14:57

The recently posted introduction of Assessing the job polarization explanation of growing wage inequality, a paper I wrote with Heidi Shierholz and John Schmitt, has started to raise some interest in the topic so it’s worth surfacing some of the issues and evidence it contains. John has already written a blog post on the fact that job polarization (the expansion of low and high-wage occupations and the shrinkage of middle-wage occupations) did not occur in the 2000s and that recent occupational employment shifts are clearly not driving recent wage trends. Our paper raises two sets of empirical issues. First, we point out that the evidence that job polarization caused wage polarization (growing inequality in the top half of the wage distribution but stable or shrinking inequality in the bottom half) in the 1990s is entirely circumstantial, relying on the two trends (employment and wage polarization) occurring at the same time without demonstration of any linkage. Second, the paper challenges whether occupational employment trends drive key wage patterns.

This post explores the point that one piece of missing evidence from the “job polarization is causing wage inequality” story is around the timing of employment and wage changes. That is, all of the evidence presented so far on job polarization relates to wage and employment trends over big chunks of time (1979–89 and 1989–99 or even 1974–88 and 1988–2008) and there has not been an examination of year-by-year trends. This is important because

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Job Polarization in the 2000s? Print
Written by John Schmitt   
Monday, 14 January 2013 09:56

In a recent post at Wonkblog, Dylan Matthews takes a fairly dim view of a new paper that Larry Mishel, Heidi Shierholz, and I have written on the role of technology in wage inequality. Matthews raises several issues, but I want to focus right now on a key point that he missed: proponents of the "job polarization" view of technological change provide no evidence that the framework actually works in the 2000s. Larry, Heidi, and I will cover other issues in additional blog posts.

In his piece, Matthews focused on our criticisms of the ability of the job polarization approach to explain wage developments in the 1990s. I'll leave the discussion of the 1990s for another day, but the more important issue for contemporary policy discussions is whether the framework is helpful at all for the last decade.

Since the occupation-based "tasks framework" that lies behind the academic research on job polarization is widely considered in the economics profession to be the best available technology-based explanation for wage inequality, Larry, Heidi, and I take the lack of evidence for this framework in the 2000s as support for our view that other policy-related factors are what is really driving inequality. We also think that if this purportedly unified framework doesn't work well for the 2000s, that it is likely not helpful for earlier periods either.

But, even if you still think technology is the main or even an important culprit, we would argue that you need a new theory of technology that actually fits the facts of the 2000s.

This is a fairly long post and starts with some necessary background --necessary because there is a sizeable gap between the way economists talk formally about "job polarization" and the way most of the public talks about the same issue.

Some background

For about ten years, a group of economists (most prominently, MIT's David Autor, who has been gracious and patient in his interaction with us around these issues) has argued that a particular type of technological change has been driving much of rising wage inequality.

In their view, the economy has three broad types of jobs: abstract cognitive jobs (think lawyers, doctors, managers), routine jobs (think manufacturing or many clerical jobs), and non-routine manual jobs (think restaurant workers or office cleaners).

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Fiscal Cliff Deal was a Raw Deal for Low-Income, Working-Class People Print
Written by Shawn Fremstad   
Wednesday, 09 January 2013 13:25

In a fascinating recent post The Nation’s Greg Kaufman pulls together a range of responses from economic justice advocates and researchers (including me) on whether the fiscal cliff deal was a good one for low-income people.

Reading it along side what's been written over the past week, I have a very difficult time understanding how the cliff deal can be characterized as anything but a raw deal for low-income people. After all, this is a deal that permanently(!) extends 82 percent of the Bush Tax Cuts without restoring the Making Work Pay tax credit, lifting the debt ceiling or averting across-the-board cuts in many low-income and other programs now scheduled to go into effect on March 1.

Not restoring the Making Work Pay tax credit means that low- and middle-income workers will experience incomes losses in 2013 compared with the last four years (2009-2010 when the Making Work Pay tax credit was in place, and 2010-2011 when the less progressive payroll tax cut was in place). That’s a horrible outcome for poorly compensated workers and for the still weak economy in general.

As I understand it, the case for this being a good deal on balance for low-income people comes down to three points: 1) it doesn’t cut programs that help low-income people; 2) it temporarily(!) extends some targeted expansions of the Child Tax Credit and the Earned Income Tax Credit that were part of the Recovery Act; and 3) it extends the federal Emergency Unemployment Compensation program through 2013.

Since the deal doesn’t include any spending cuts (and just defers decisions about them for a few weeks), there’s no reason to celebrate the mere absence from the deal of specific cuts to low-income benefits. 

The one-year extension of Emergency Unemployment Compensation (which amounts to about $30 billion for the long-term unemployed) is terrific, although hard to celebrate as anything more than minimally decent with nearly five million people currently out of work for more than six months.

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Back to Full Employment Print
Written by Colin Gordon   
Wednesday, 09 January 2013 09:00

By the conventional “peak to trough” measure, the recession that began in December 2007 ended 18 months later, in June 2009. But you’d be hard-pressed to find much evidence of “recovery” in the labor market.  Job creation is barely keeping up with population growth.  The marginal decline in the unemployment rate (from about 10 percent at its worst to just under 8 percent at the end of 2012) has been driven mostly by people dropping out of the labor force.  And long-term unemployment remains stubbornly high.

All of this begs a bigger question: What would real recovery look like?

The first and simplest measure (see graphic below) is simply to chart our progress towards regaining the jobs lost during the downturn.  This yields a flat threshold at the December 2007 employment levels, and a jobs deficit that pushed past 8 million in late 2009 and now sits at about 3 million.  

This “struggling back to the surface” measure has some utility, especially in comparing the recovery trajectories of different recessions.  But it becomes less useful the longer the downturn lasts, as population growth creates a new baseline for the labor force.  Getting back to December 2007 employment has little meaning after five years of immigration, retirements, and high school and college graduations.

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Having Your Minimum Wage and EITC, Too Print
Written by John Schmitt   
Tuesday, 08 January 2013 09:45

Economic commentator Evan Soltas really missed the boat in his most recent Bloomberg column on the minimum wage. He gets some of the economics right —the best empirical evidence on the minimum wage, he notes, for example, "find[s] small, if any, impacts of the minimum wage on employment." But, his analysis of the politics is badly misinformed.

Here is the way Soltas frames the politics around a minimum-wage bill sponsored by Democratic Senator Tom Harkin of Iowa:

"Liberal arguments for increasing the minimum wage have a fundamental flaw: They restrict the set of policy choices to either a minimum wage increase or doing nothing. That means they overlook the single most important federal policy for the poor: the Earned Income Tax Credit."

This is a terrible straw man. Liberals are, in fact, typically strong supporters of both the minimum wage and the EITC.

My CEPR colleague, Dean Baker —who Soltas links to in order to make his case that liberals have a "minimum wage or nothing" view— is, for example, a long-time supporter of both the minimum wage and the EITC.

More to the point, Sen. Harkin —whose proposal to increase the federal minimum wage from its current level of $7.25 per hour to $9.80 in 2014 was the impetus for Soltas's column— is also a strong advocate for the EITC. Less than a month ago, for example, The Hill described Harkin and his Senate colleague Chuck Schumer as "blasting" Republicans for allowing a recent expansion of the EITC to expire as part of the fiscal cliff negotiations. And here is a link to coverage of a press conference last summer, where Harkin was also defending the EITC against Republican cuts.

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Labor Market Policy Research Reports - December 15, 2012 - January 4, 2013 Print
Written by Mark Azic and Will Kimball   
Friday, 04 January 2013 16:45

Here’s a collection of labor market policy research reports released over the past two weeks:


Center for Law and Social Policy

Seizing the Moment: A Guide to Adopting State Work Sharing Legislation After the Layoff Prevention Act of 2012
Neil Ridley and George Wentworth


Employment Policy Research Network

An Incompletely Conceptualized Statute
Moshe Marvit


Institute for Women’s Policy Research

Access to Paid Sick Days in Portland, Oregon
Isela Banuelos and Claudia Williams


National Employment Law Project

The Low-Wage Recovery and Growing Inequality


Political Economy Research Institute

Early Childhood Education as an Essential Component of Economic Development
Arthur MacEwan

 
CEPR News December 2012 Print
Written by Dawn Lobell   
Wednesday, 02 January 2013 15:15

The following highlights CEPR's latest research, publications, events and much more.

CEPR on Haiti
CEPR has been out in front calling for the United Nations to take responsibility for bringing cholera to Haiti over two years ago, writing numerous op-eds, papers and blog posts on the issue over the course of the past several years. CEPR released this press release after the U.N. finally announced a plan to deal with the crisis. CEPR Co-director Mark Weisbrot called the U.N.’s plan a “welcome step,” but he noted that it “falls short, as the key components of water and sanitation infrastructure upgrades would be ‘needlessly delayed’.” Mark explained further in this column for Al Jazeera.

Filmmaker Oliver Stone recently launched a petition to push the U.N. to end cholera in Haiti. CEPR posted several posts on the issue in its Haiti: Relief and Reconstruction Watch blog, including this one about Haitian groups protesting on Human Rights Day, and this one on the U.N. announcement. CEPR International Communications Director Dan Beeton was quoted in this article in the Miami Herald, and CEPR Research Associate Jake Johnston was quoted in this Al-Jazeera piece.


CEPR on the “Fiscal Cliff” and Why the Chained CPI is a Bad Idea
Meanwhile, CEPR’s domestic policy team has been out in front on the so-called “fiscal cliff” debate. CEPR Co-director Dean Baker took to the airwaves and to the printed page to remind everyone that the statement "if we don’t get a deal by the end of the year we’re going to see the economy collapse" is dishonest, at best. Dean appeared on Bloomberg’s Business Week, Democracy Now!, CNBC’s Street Signs, and Background Briefing with Ian Masters to set the record straight.  He was also on the Voice of Russia radio, and KPFA.

CEPR Director of Domestic Policy Nicole Woo also countered fiscal cliff scare stories with appearances on CNBC and WUSA 9. Nicole was also on WPFW radio’s What’s at Stake as well as Pivot Point with Maya Rockeymoore, among others.

Dean took on the media in his blog Beat the Press, posting numerous critiques of news coverage of the issue. (Yes, each word is linked to a separate critiqueand there’s still more).

On the heels of the news that the White House is considering a budget deal under which the annual cost of living adjustment for Social Security benefits would be indexed to the

chained consumer price index, CEPR released a report titled The Chained CPI: A Painful Cut in Social Security Benefits and a Stealth Tax Hike. The paper, by Nicole Woo and CEPR Domestic Communications Director Alan Barber, points out that switching to the Chained CPI would result in cuts to already modest Social Security benefits. The brief also notes that the Chained CPI is likely not an accurate measure of the inflation rate seen by seniors.

Dean posted his thoughts on the Chained CPI in the CEPR blog and wrote several Beat The Press posts on the effects of the proposed change. He was on Minnesota public radio with Kevin Hassett talking about the future of SS and Medicare, and he also appeared on WBAI’s Wakeup Call. Nicole appeared on WBAI’s Talk Back! with Hugh Hamilton and Alan Nathan's BattleLine . CEPR was also mentioned in this article on UPI.com.

CEPR Senior Research Associate Shawn Fremstad weighed in with this CEPR blog post on how the Chained CPI would also harm children, low-income working-age adults and people with disabilities in the here and now, not just after they retire.

Last but not least, Dean wrote a CEPR blog post on the “demographic crisis”, calling it “nonsense”. He explains his reasoning to NPR’s Planet Money, here.

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The Beveridge Curve and Structural Unemployment Print
Written by Dean Baker   
Tuesday, 01 January 2013 17:12

There is a whole industry of economists and policy types who are incredibly anxious to find evidence of structural unemployment. The reason is that structural unemployment implies a mismatch of the available jobs and the skills of the unemployed.

This is important because if our unemployment problem is structural then simply using macroeconomic policy to generate more demand won't be of much help. If we want to get people back to work we have to get them the right skills or in the right place (there can be a locational mismatch as well) for the jobs that are available. That is a very difficult and much more complicated process than just spending money.

Recently some proponents of the structural unemployment view of the economy have been highlighting an outward shift in the Beveridge Curve. The Beveridge Curve relates unemployment to the vacancy rate (the number of job openings divided by the number of jobs). In general, higher rates of unemployment are associated with lower vacancy rates. However, in the last couple of years there has been some increase in the vacancy rate without as large a drop in unemployment as would ordinarily be expected. This is taken as evidence that employers are having difficulty finding workers with the necessary skills in spite of the large number of unemployed workers. This is the story of structural unemployment.

A new paper from the Boston Fed by Rand Ghayad and William Dickens looks at this shift in the Beveridge Curve more closely. It finds a very interesting story. If we look at the long-term unemployed (people who have been out of work for more than 26 weeks) we see this shift clearly.

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The OECD Economic Outlook: Just How Broke Will the United States Be In 2042? Print
Tuesday, 25 December 2012 05:48

On December 31, 2011 the Net International Investment Position (NIIP) of the United States was a little worse than negative 4 trillion dollars. This means that total holdings of U.S. assets such as stocks, bonds (private and government) and real estate, by foreigners exceeded total holdings of foreign assets by people in the United States by more than $4 trillion. This is more than one quarter of the annual GDP of the United States. Despite this negative position, in 2011 American-owned assets had still generated $235 billion—1.6 percent of GDP-- more income than was lost in corresponding payments to foreigners.

This unusual set of circumstances is not likely to continue.  Earlier this month, the OECD released a report “Looking to 2060: Long-term global growth prospects” based on the baseline projections of its June Economic Outlook.  The report projects that real per-capita GDP in the United States will rise 1.58 percent per year from 2010 to 2060.  That is, output per person will be 119 percent higher in 2060 than in 2010.  On the other hand, the OECD also projects that an increasing amount of that production will represent income to foreigners.

Apart from a brief surplus in 1991, the last 30 years have seen negative U.S. net national savings in the form of the current account deficit—essentially a large trade deficit offset in part by a small net income from assets.  The OECD projects that the current account deficit will grow to a record 6.4 percent of output by 2030 (over $1 trillion annually in today’s economy) before steadily recovering over the next three decades as net foreign investment in the United States declines.  This projected pattern of current account deficits implies large sales of U.S. assets to foreigner and therefore further deterioration of the U.S. NIIP.  By 2038, net foreign ownership of U.S. assets will rise from 26.7 percent of GDP to something closer to 54.5 percent.[1]  If these assets generate a return akin to government bonds, then in 2040 this will represent a flow of cash out of the United States equal to about 4 percent of GDP or $640 billion a year in today’s economy.[2]

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'Choosing' to Work Part-Time Print
Written by Milla Sanes   
Friday, 21 December 2012 13:00

As we noted in an earlier post, the overall rate of part-time employment has not moved much over the past four decades. Another thing that has remained fairly constant over this time is that women work part-time at nearly double the rate of men.

womenpt-a-new

As the figure below demonstrates, the main reason for higher part-time rates among women is that they “choose” part-time jobs for what the Bureau of Labor Statistics calls "noneconomic" reasons. When it comes to those who involuntarily work part-time, men and women are at increasingly identical rates.

womenpt-b-new

This "voluntary" difference between women and men in part-time jobs stems mostly from gender inequality in the home, rather than the workplace. Even as women’s standing in the workforce has improved over the years, women continue to hold part-time jobs at a nearly constant rate. Women "choose" part-time jobs primarily because they are more compatible with their outsized unpaid work responsibilities including household work and childcare. When asked why they work part time, women answer “Child care problems” at more than seven times the rate that men do, and are almost four times more likely than men to cite “Other family/personal obligations.” In fact, of the people who usually work part-time and answered “Child care problems” as their reason why, 94.6 percent were women.

womenpt-c-new

At least with respect to this aspect of workplace inequality – and almost certainly with respect to others as well – further progress for women depends on reducing the long-standing gender disparities in housework, child-care, and other forms of care work.

This post corrects an earlier version that contained data errors in the first two graphs.

 
A Message from Dean, Mark and CEPR Staff Print
Written by Dawn Lobell   
Thursday, 20 December 2012 15:00

Dear Friend of CEPR,

It’s that time of year, the time when we ask all of our friends to support CEPR with a year-end donation. Thanks to all of you who have supported us throughout the years. We really do rely on your gifts to help fund our research, analysis, outreach, publications – everything we do.

When you donate to CEPR, you can be assured that your gift will be used wisely. Whether it’s calling for the UN to take responsibility for bringing cholera to Haiti or calling out the elites who use “fiscal cliff” scare stories to hide their true agenda, CEPR is there, out in front, providing fact-based research and well-reasoned analysis and pushing back on the mainstream media spin.

You can also be assured that your gift will be used effectively. This year we are especially proud to have once again been the most cost-effective think tank. CEPR ranked first in media hits per budget dollar of all major think tanks in 2011, based on an analysis of Fairness and Accuracy in Reporting’s 2011 think tank media citation rankings and organizational budgets.  CEPR also ranked first in web traffic per budget dollar in 2011, getting more than twice the number of hits as its closest competitor.

With the support of people like you, we have been, as The Guardian put it, “a professional thorn in the side of orthodoxy” for the past dozen years. Your gift will help us to continue to speak and write the economic truth for many more years to come. And we’ll do it more efficiently, too.

Best wishes for a healthy holiday season, and a very happy new year,

Mark, Dean and CEPR Staff (and dogs)

Olive with scarf

 
Nick Kristof Needs to Stop Spouting (and Tweeting) Shoddy Statistics About Young People with Severe Disabilities Print
Written by Shawn Fremstad   
Thursday, 20 December 2012 12:15

I wrote last week about Nick Kristof's irresponsible call to cut Supplemental Security Income for severely disabled children. Since then Kristof has received an outpouring of criticism for the numerous errors of fact he made in the story as well as his oddly timed embrace of the Romney 2012 campaign's "anti-entitlement strategy." On the fact-checking front, notable responses include ones by Community Legal Services in Philadelphia, Kathy Ruffing and LaDonna Pavetti of CBPP, and University of Chicago prof and health policy expert Harold Pollack.

Since then Kristof has only doubled down, although limiting himself to the 140 characters allowed by Twitter, including by pompously citing —in Chinese of course!—one of Chairman Mao's maxims ("实 事求是" or seek truth from facts") and reiterating some shoddy statistics included in his initial article: "But when 8% of poor kids get SSI & 2/3 then graduate immediately to adult disability, you're perpetuating poverty."

Let's do some 实事求是'ing of own on this last claim:

"8% of poor kids get SSI":  No, it's half that—less than 3.9% of low-income kids receive SSI. Kristof got 8% from a truth seeker affiliated with AEI who manufactured it by dividing the number of children receiving SSI (1.28 million in 2011)  by the number of children living below the federal poverty line (16.1 million in 2011). This would be fine if SSI were limited to kids with incomes below the federal poverty line, but it's not. In fact, about half or more of the children receiving SSI have incomes above the federal poverty line, mostly between 100-200% of the poverty line. So, an accurate SSI participation statistic would use the number of low-income kids below 200% of the poverty line (32.7 million in 2011). Dividing the 1.28 million kids receiving SSI by the 32.7 million kids under 200 percent of poverty gets us 3.9% not 8%.

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The Chained CPI is a Bad Deal for Kids and Low-Income Working-Age Adults Too Print
Written by Shawn Fremstad   
Wednesday, 19 December 2012 18:04

Criticism of proposals to shift to the Chained CPI have focused almost exclusively on how the switch would harm seniors. But as Alan Barber and Nicole recently noted in a CEPR brief, the switch would also harm people with disabilities, children, and low-income working-age adults in the here and now, not just after they retire. 

This is an issue that deserves vastly more attention than it has received to date, including from anti-poverty advocates and researchers like me. The shift to the Chained CPI would harm low-income children and non-elderly adults because a long list of means-tested benefits currently use a non-chained CPI, typically the CPI-U, to adjust eligibility standards and/or benefits amounts. For example, as the Congressional Research Service (CRS) detailed in a report last year, in addition to Social Security, the following major federal benefit benefit programs include inflation-indexing elements that rely on the non-chained CPI-U or CPI-W:

—Medicaid;

—Supplemental Security Income (providing supplemental income for severely disabled children and adults);

—the Earned Income Tax Credit;

—the Child Tax Credit (refundable portion for low-income workers with children);

—the Supplemental Nutritional Assistance Program (SNAP or food stamps);

—Child Nutrition Programs, including school meals.

Moreover, a much longer list of programs big and small for low-income kids, working-age adults, and people with disabilities—more than 50 programs according to CRS—have income eligibility standards, benefits, or other elements that are tied to the federal poverty income guidelines published by HHS each year. As you may have guessed by now, these guidelines are currently indexed annual based on the non-chained CPI-U. 

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Thoughts on the Chained CPI, Social Security, and the Budget Print
Written by Dean Baker   
Monday, 17 December 2012 21:43

According to reliable sources, the Obama administration is seriously contemplating a deal under which the annual cost of living adjustment for Social Security benefits would be indexed to the chained consumer price index rather than the CPI for wage and clerical workers (CPI-W) to which it is now indexed. This will lead to a reduction in benefits of approximately 0.3 percentage points annually. This loss would be cumulative through time so that after 10 years the cut would be roughly 3 percent, after 20 years 6 percent, and after 30 years 9 percent. If a typical senior collects benefits for twenty years, then the average reduction in benefits will be roughly 3 percent.  

There are a few quick points worth addressing:

  1. The claim that the chained CPI provides a more accurate measure of the cost of living;
  2. Whether Social Security benefits are now and will in the future be sufficient to allow for a decent standard of living for retirees; and
  3. Whether this is a reasonable way to be dealing with concerns over the budget.

This are taken in turn below.

Is the Chained CPI More Accurate?

While many policy types and pundits have claimed that the chained CPI would provide a more accurate measure of the cost of living for seniors, they have no basis for this claim. The chained CPI is ostensibly more accurate for the population as whole because it picks up the effect of consumer substitution as people change from consuming goods that increase rapidly in price to goods with less rapid price increases.

While this is a reasonable way to construct a price index, it may not be reasonable to apply the consumption patterns and the substitution patterns among the population as a whole to the elderly. The Bureau of Labor Statistics (BLS) has constructed an experimental elderly index (CPI-E) which reflects the consumption patterns of people over age 62. This index has shown a rate of inflation that averages 0.2-0.3 percentage points higher than the CPI-W.

The main reason for the higher rate of inflation is that the elderly devote a larger share of their income to health care, which has generally risen more rapidly in price than other items. It is also likely that the elderly are less able to substitute between goods, both due to the nature of the items they consume and their limited mobility, so the substitutions assumed in the chained CPI might be especially inappropriate for the elderly population.

While the CPI-E is just an experimental index, if the concern is really accuracy, then the logical route to go would be for the BLS to construct a full elderly CPI. While this would involve some expense, we will be indexing more than $10 trillion in Social Security benefits over the next decade. It makes sense to try to get the indexation formula right.

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Labor Market Policy Research Reports, December 8 – 14, 2012 Print
Written by Mark Azic   
Friday, 14 December 2012 16:00

Here’s a roundup of labor market research reports released over the past week:


Center for American Progress

Michigan ‘Right-to-Work’ Bill Is the Wrong Economics for the Middle Class
Adam Hersh, Heather Boushey and David Madland


Center for Economic Policy and Research

The Chained CPI: A Painful Cut in Social Security Benefits and a Stealth Tax Hike
Alan Barber and Nicole Woo


Economic Policy Institute

New Louisiana Retirement Plan is Bad for Workers and Taxpayers
Monique Morrissey

 
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